TEM Lab: Rwanda – RD Tech

By Mike Byrne

This past Wednesday our team hit the mid-point of the project. The following is an update of where we have been and a quick glimpse of where we are headed.

As a reminder, RD Tech (the client) has contracted us to:

1. Research and cost alternative supply chain operations, focusing on shifting the refurbishment of RD Tech’s imports from an external supplier in the US to a vertically-integrated model with refurbishment performed by the client in one of three East African locations: Dar Es Salaam, Tanzania; Kigali, Rwanda; Mombasa, Kenya. This strategy should include post-user product disposal.
2. Conduct a cost-benefit analysis of our recommended best alternative strategy, including actionable recommendations for implementation.

Week 1
The first week was spent primarily adapting to our environment, defining the scope of the project with collaboration from the client, strategizing how to break the project into manageable pieces, and assigning roles within the team. This included meeting with the client and its US investors, tours of the client’s facilities and warehouses, and individual meetings with the client to gather information on its current logistics and supply chain. In addition, the team spent considerable time dissecting the project. Coming out of week 1, the team identified the following targets to inform the final recommendation:

• Business climate analysis of potential refurbishment locations, including: ease of starting a business, construction permit accessibility, employment & labor regulations, property registration procedures, credit accessibility, investor protections, taxes and operating licenses, legal environment, and ease of business closure
• Country risk analysis for each of 3 potential refurbishment locations
• Market demand forecasting for 11 countries in east and central Africa to determine the most attractive markets for current and future used computer distribution
• Freight routing and pricing for all inland freight shipments from the 3 potential refurbishment sites to the 5 most attractive markets as determined by the market demand forecast
• New refurbishment center costing for all three potential refurbishment locations. Costing will include pricing: construction/leasing, PPE, labor cost, utility costs, taxation and licensing, inland freight, duties & applicable taxes, among others
• Export Processing Zone (EPZ) research and determination of eligibility, benefits, and feasibility
• E-waste disposal plan and financial analysis

Week 2
As the team moved into week 2, it focused on breaking down RD Tech’s current supply chain, forecasting used computer market demand, and completing the country risk analysis. The strategy was to gain an understanding of the current market and business environments before pricing the costs associated with vertically integrating refurbishment in East Africa.

While the week was research intensive, much of the information was found in deep dive database searches. Nearing the end of the week, it became clear that the team would need the price of a used computer in each of the 11 potential markets in order to have a unified variable for projecting the future market demand in each country. This required the team to begin primary research and gave a glimpse into the complexities of pricing that would come to dominate the project throughout week 3 and into week 4. What initially began as simply identifying used computer retailers throughout East Africa on the internet and contacting them for pricing, became a nearly impossible task that required attention from the entire time and a Tanzanian research assistant in the US. Unfortunately, the team was unable to obtain pricing for each targeted market and, thus, comparable data was eventually substituted. Both the current supply chain and the country risk analysis were completed successfully.

Week 3
Having completed the market study in week 2 and identified the three potential locations for a refurbishment facility, the team began the week with a strong push to price the costs of building and operating the refurbishment centers and supplying retail stores. This included the following primary and secondary research:

• Collaborate with client to determine estimated volume, enabling completion of three possible refurbishment facility layout diagrams
• Determine necessary dimensions, staffing, and equipment for each layout
• Continue research and data collection for taxes, utilities, spare parts, and wages
• Contact numerous real estate and bonded warehouse sources to determine rental and purchase prices for land and warehouses
• Investigate eligibility rules and benefits of operating in Export Processing Zones (tax free zones)
• Contact ministries and investment boards regarding business operating laws and procedures (specifically labor, repatriation of profits, and trade laws)
• Meet with four logistics companies to price inland and ocean freight routes to market and determine applicable port fees, duties, and other expenses

Pricing and researching the aforementioned is extremely complicated and often bewildering in East Africa. In addition to struggling with poor infrastructure and cultural considerations, information and pricing were often difficult to find. Assuming information could be obtained from a reliable source, it would often be contradicted at a later point in time and have to be reconfirmed through additional time-consuming research. Furthermore, the team struggled with differentiating between official rules and legalities and the realities on the ground. Often rules and laws are not enforced and/or regularly broken, thereby creating a challenge in determining what exactly is applicable to the project and should be priced.

Week 4 and beyond
As the project heads into its final two weeks in-country, the team has three stages left to complete. First, the team will conclude the pricing phase of the project. Tuesday, Feb. 23, has been set as the final day for all pricing data. From Wednesday through Friday of the same week, the team plans on delving into the second stage – analysis. The team will analyze the numerous variables, including pricing, to determine which of the three potential refurbishment facility locations is best suited for RD Tech’s future growth. Preparing for the client recommendation and composing the accompanying report will comprise the third and final step in completing the in-country portion of the project. Despite efforts to prevent missteps, the team is anticipating gaps in its research during the analysis phase and has, therefore, built in substantial buffer time to account for any additional research. This additional time includes both Saturday and Sunday of this coming weekend.

The final conversation with the client to present the team’s recommendations is scheduled for Thursday, March 4th.

Posted: 02|22|10 at 2:56 pm.
Filed under: Leadership, Mike Byrne.
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